2021 starts with a choppy ride

2021 began with a choppy ride for the US and EU markets. The Dow and S&P opened with a new life high and later cracked by 2.5-3% from the highs. But later reduced their losses to half.

Gold after hitting a precise $1962.5 targets, crashed for $1902 to fill the gap. The USD index stayed lower at around 89.4 but the bonds yield made massive 10-15% gains on Wednesday. Gold after gaining $50 on Monday and losing $50 on Wednesday, showed significant volatility. These fluctuations are expected to continue as there would be a line up of significant global news from vaccine to new mutations, from stimulus to geopolitical worries.

Currently, there are two worries that would be vexing investors in the precious metals sector in recent weeks believes the RSBL analysts.

One is that gold and silver won’t rise much because big banks like JP Morgan will cap it by dumping onto the paper market. The key point to keep in mind is that gold is “real money” and this being so,  the idea that a currency like the dollar can collapse towards zero and gold won’t go up because the banks will be selling it on the paper market is both absurd and ridiculous – what would happen is that an untenable massive gap would develop between the price on the paper market and the price on the physical market, and the paper market would become rapidly irrelevant and obsolete, so we don’t have to worry about that. In fact, to the extent that they are actually suppressing the gold price, all they are doing is creating a “pressure cooker” effect that will lead to a massive upside explosion, but you certainly don’t want to wait for that to happen before you take positions across the sector.

 The other is that Cryptos are stealing “gold’s thunder” and siphoning off funs that would otherwise go into the precious metals. One reason that Cryptos are going ballistic now is that the NWO (New World Order) plan to use Cryptos as the vehicle to pay the Universal General Allowance (UGI) to the dispossessed serfs who are permitted to live in their new system. In order to qualify for this they will have to be fully compliant with all the dictates of their Masters which will of course include being vaccinated.

There is also a misplaced belief that you are “outside the system” when you buy Cryptos, but you won’t be outside the system if they decide to “pull the plug” on the internet, a possibility raised in this dystopian short film Dark Winter, which they may do because the internet is the only way to find out the truth about what is going on. The NWO are believed to be developing and perfecting their own Cryptos, and when it suits them they will simply outlaw or block all of the others, or make ownership of them punishable by a jail sentence – don’t forget they are above the law and can do anything they like, like the current lockdowns which are illegal. At least with the Precious Metals you can physically own them and they will not disappear if banks close their doors or the internet is taken down believes the top gold dealer in India RiddiSiddhi Bullions Limited.

Gold has already punched through its 2011 highs last year, but has since reacted back below them which are thought to be a normal reaction prior to renewed advance. A big concern with a pattern like this is that it could stall out for a long time marking out a Handle to complement the Cup before continuing higher, but this doesn’t look likely on this occasion because the dollar looks like it is on the verge of collapse with the Fed set to continue attacking it relentlessly.

We now have a very rare setup for gold which is in position to “go ballistic” as the dollar collapses. The dollar is being intentionally destroyed by the Fed which is creating dollars in vast unprecedented quantities in order to buy up distressed assets on the cheap and in order to pave way for the new “digital dollar”. We are in the last stages of the fiat endgame where money creation goes vertical, quickly leading to becoming worthless, as happened in Venezuela and Zimbabwe.

Its Wrap Up Time

 In the year 2020 the new positive was the word negative. Well for gold, it was all positive only. The yellow metal rose more than 22% since the start of the year, with the highest peak reached in August when it hit a new record high of $2,075 an ounce. Since then, gold has been consolidating below the $1,900 an ounce level.

In 2020, the economic and social uncertainties triggered by the coronavirus pandemic turned the spotlight on gold as a safe haven.

RSBL analysts argued that it was a sharp turn in global monetary policies that led to a low interest rate scenario and unprecedented liquidity, which began in mid-2019, gave a boost to gold price in all major currencies, making the yellow metal attractive for investors.

There were restrictions, lockdowns, weakening economies, declining dollar and overall a poor global growth which pushed investors towards gold. Though vaccination campaign did try to shake gold, but it couldn’t break it. Gold managed to recover the drops it faced as the vaccine ride began.

In the domestic market too, gold opened this year at Rs.39, 199 and steadily rose to Rs.56, 191. The price of the yellow metal reached an all-time high of Rs 56,191 per 10 grams at MCX and USD 2,075 an ounce in the international market in August.

RSBL Gold prices in India got an additional support from rupee depreciation against the dollar during the year as spot rupee was down by around three per cent year-to-date.

Further, the sharp decline in US equity indices in the first half of the year and the fall in real yields drove investors out of dollars which boosted buying in gold.

As we approach 2021, gold will remain in focus for investors. The main drivers cited include

Inflation-let’s assume that many people do get vaccinated and the vaccine is effective, then the economy should take off in a serious way in the second half of next year. The inflationary scenario would then become a real possibility, which would be positive for metals

Inflation will be a big concern to watch next year, which will encourage a flight to gold's safety trade.

Weaker U.S. dollar- The dollar could weaken on the back of more stimuli and that could help gold prices rise once again. Also, inflationary expectations due to the massive stimulus can be seen as a positive factor that could attract investment buying once again in 2021.

Economic concerns- With all this money printing we've gone through in 2020, next year will be the year we are all illusioned of the notion that we can print money without consequences. Gold can go through $2,100, and we could possibly challenge $3,000.  Rising debt-to-GDP ratio, quantitative easing, and the narrative in Modern Monetary Theory (MMT) as the reasons behind gold's move to new record highs next year.

Currency debasement fears- For gold, this means new all-time highs with more investors choosing to diversify into the precious metal in order to protect themselves from rising prices and currency debasement.

Debt- Vaccine is not going to cure the amount of global debt. Central Bank policies would continue to remain accommodative in spite of a successful vaccine.

Central Banks low interest rates and easy liquidity -_Next year will see central banks holding their foot down on the stimulus pedal with no chance of rates going higher which keep the bullish sentiments alive for the yellow metal.

Stimulus package. - Fed has been consistent, and we will see more fiscal support next year. This is the main reason why gold will make a strong run-up towards $2,300. Central banks across the globe, have pledged to keep rates low and easy liquidity to aid growth. Further, a stimulus package from the US government will add to the existing dollar liquidity in the system and may end up weakening the greenback and strengthening gold

Equities Another key trigger that will boost gold towards $2,100 next year will be stock market volatility. The U.S. share market is trading at historical extremes because investors are optimistic about the vaccine curing it all. In 2021, we are likely going to have equity market volatility throughout the year, and that should be supportive of precious metals prices.

Senate Runoff elections- the key driver that precious metals traders are eyeing is the Jan5 Senate runoff elections in Georgia. If Democrats win both the seats that are up for grabs, it would give them control of the Senate agenda and the fiscal policy is likely to stay loose which would heavily weigh on the green back and be bullish for the precious metals.

Overall, it is going to be a very strong year for gold. You are going to see unprecedented fiscal and monetary stimulus continue in the first half of the year confirmed the top gold dealer in India, RiddiSiddhi Bullions Limited.

These were the key drivers that will play a key role in influencing gold prices towards the higher end. 

Not to forget the very important Vaccines- A successful vaccine drive is still far from the near reality. We don’t know how many people it will reach out, how effective will it be, will it be able to combat the new mutation etc.  If the vaccine is not as effective or less than 50% of the population takes the vaccine, then the economy is going to struggle, and both the government and the Fed is not going to have any option but to increase stimulus which will further be constructive for gold.

So over all, the Bull Run continues for gold in 2021. Even if the vaccine works, there are concerns that will suppress the vaccine sentiments and will continue to push gold higher maybe to new life time highs.